The Best of This Week From Hedgeye

Here's a quick look at some of the top videos, cartoons, market insights and more from Hedgeye this past week.

HEDGEYE TV

$KSS: Still a Short After 2014 Investor Conference?

Retail Sector Head Brian McGough and Retail Analyst Alec Richards give their unfiltered reactions to Wednesday’s Investor Conference. After listening to Kohl’s management team Hedgeye remains bearish on the name.

Video | Morning Macro Call 10/28/14

This is a free sneak peek at Hedgeye's Morning Macro Call for institutional subscribers.

HEDGEYE IN THE MEDIA

Video | Keith Discusses The End Of QE And The Beginning of Deflation on Fox Business

On Thursday's Opening Bell with Maria Bartiromo, Keith McCullough analyzes how to invest in a deflationary environment.

CARTOON

It Is Fall After All

It’s the season for #Quad4, which means both growth and inflation are slowing.

Birds Of A Feather

The Fed, led by Janet Yellen, concluded its two-day policy meeting Wednesday.

CHART

@Hedgeye Longs Vs. Shorts #Timestamped

Don't Call It Bad!

POLL OF THE DAY

Halloween Poll of the Day: Which Central Bank Is Scarier?

The Bank of Japan shocked global financial markets Friday by expanding its massive stimulus spending in a stark admission that economic growth and inflation have not picked up as much as expected sending Japanese stocks soaring 4.8% to their highest close since 2007 as the yen skidded to near seven-year lows against the dollar.

Commodities: Weekly Quant

Ben Ryan

Analyst

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10/31/14 04:14 PM EDT

The Week Ahead

The Economic Data calendar for the week of the 3rd of November through the 7th of November is full of critical releases and events. Attached below is a snapshot of some of the headline numbers that we will be focused on.

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Early Look

daily macro intelligence

Relied upon by big institutional and individual investors across the world, this granular morning newsletter distills the latest and most vital market developments and insures that you are always in the know.

EHTH: Covering the Short (Removing from Best Ideas List)

Takeaway:We added EHTH Short to our Best Ideas List on 2/7/14. Our bearish thesis remains largely intact, but we're out of catalysts until 1Q15.

KEY POINTS

NOTHING HAS REALLY CHANGED: The only material positive news from the 3Q14 earnings call was that IFP commission rates are expected to remain the same in 2015; pushing back an inevitable downside catalyst to 2016 at the earliest. But the same risks that crippled the business in 2014 remain into 2015. EHTH still has limited connectivity with the public exchanges (a requisite to selling subsidized plans), which means EHTH may not have the ability to drive enough new account growth to offset its churning IFP members. All things considered, the setup hasn't changed much from 2014; EHTH could see another down year in IFP membership next year.

BUT WE'RE OUT OF CATALYSTS UNTIL 1Q15: Open Enrollment runs from 11/15/14-2/15/14. EHTH will not really know what 2015 will look like until 1) it starts collecting premiums on its new members, and 2) it knows how many of its current members have churned. The company will issue its 2015 guidance before that occurs, which means that can go either way since it won't really understand its 2015 prospects until its 1Q15 earnings release. Until then, remaining short could expose us to near-term bullish catalysts on immaterial events (e.g. random news flow similar to last year). Given that the stock is up following cautiously optimistic management commentary for 2015, we would rather book the gain and get out of the way...for now.

Let us know if you have any questions or would like to discuss in more detail.

Hesham Shaaban, CFA

@HedgeyeInternet

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10/31/14 02:19 PM EDT

Video | Is There A Bubble in Restaurant Stocks?

In an excerpt from an Institutional Call earlier this week, Restaurant Sector Head Howard Penney fields a question concerning a bubble in low quality small cap U.S. stocks. As competiion heats up in the space CHUY’s odds of beating the larger more well known names in the space appear slim. The restaurants team recently turned bearish on CHUY, adding it to the Best Ideas list as a short.

FLASHBACK: Hedgeye's Howard Penney Says Short Starbucks $SBUX

Takeaway:Hedgeye managing director Howard Penney added SBUX to the Hedgeye Best Ideas list as a short on September 11.

Editor's note: This note by Hedgeye managing director Howard Penney adding Starbucks (SBUX) to the Hedgeye Best Ideas list as a short was originally published September 11, 2014 at 16:49.The world’s biggest coffee-shop chain posted quarterly revenue after the close yesterday that missed estimates sending shares lower approximately -3% today.

We are adding SBUX to the Hedgeye Best Ideas list as a short.

We are hosting a Black Book call next Thursday, September 18, 2014 at 11am EST to run through our thesis and field questions. We will send out dial-in information and materials for the call next week.

SBUX: The Seven-Year Itch

It’s been seven years since Howard Schultz penned his now famous memo to management and employees, outlining where the company had gone wrong and what it needed to do to get back on track. It has also been six years since I turned positive on Starbucks – but nothing lasts forever.

McDonald’s went on an eight-year corporate revival before it lost its luster and we fear Starbucks is nearing the end as well. In this presentation, we will outline a number of concerns we have with the company leading us to believe that the street is overly optimistic about its future prospects.

I recently read that Harvard Business School Professor and Historian Nancy Koehn has studied Starbucks and its leader, Howard Schultz, for nearly 20 years. She recently released a new HBS Case Study, “Starbucks Coffee Company: Transformation and Renewal,” which traces “the dramatic arc of the company’s past seven-plus years – a period that saw Starbucks teeter on the brink of insolvency, dig deep to renew its sense of purpose and direction, and launch itself in new, untested arenas that define the company as it exists today.”

While all of this may be true, I too have been following Howard Schultz and Starbucks for over 20 years. Unlike Ms. Koehn, however, I did not go to Harvard and I am not a HBS Professor. But I did release a Hedgeye Black Book in early 2009 detailing why I believed Starbucks was a great company and the stock was a great buy.

Today, while Starbucks is still a great company with a strong management team, the stock is far less attractive. More specifically, and perhaps to the heart of the topic, I believe the company’s domestic business is maturing and management is rapidly attempting to stem this decline by deviating from its core. Let us not forget that sentiment is near an all-time high. To me, this HBS Case is simply another example of a Starbucks “top.”

Our call on SBUX will focus on:

Menu trends suggest increased complexity and slower throughput

Decelerating same-store sales and traffic

Rapid diversification away from the core business

Proprietary Hedgeye survey confirming new menu initiatives are not resonating with consumers

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